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Court Deems Postage Increase As Temporary

June 5, 2015 Mark Hrywna

An appeals court has ruled that the Postal Regulatory Commission (PRC) was reasonable when determining that the impact of the 2007-09 recession is exceptional only for a limited time until it becomes the “new normal” and not permanent.

The 20-page ruling by a three-judge panel was issued today in the United States Court of Appeals for the District of Columbia Circuit and also remanded the case back to the PRC to review its methodology and calculate the temporary amount of lost revenue that the United States Postal Service (USPS) can recover. The court rejected the “count once” rule that the PRC used, counting only one year of lost volume and revenue due to the recession because it was arbitrary.

“We prevailed in our most important endeavor – that the exigent surcharge will not be permanent,” said Stephen Kearney, executive director of the Alliance of Nonprofit Mailers (ANM). The court did not address whether the current surcharge will be removed this summer. “That important decision should be made by the PRC in short order,” he said.

ANM aimed to get the surcharge tossed out but the main goal, Kearney said, was to prevent USPS from getting a permanent surcharge, which would have cost mailers an estimated $60 billion.

The PRC “sensibly concluded that the statutory exception allowing higher rates when needed to respond to extraordinary financial circumstances should only continue as long as those circumstances remained extraordinary,” the court ruled. “The commissioner’s ‘new normal’ test is designed to capture precisely the time when its effects lose their exceptional character.

“The commission permissibly reasoned that just because some of the effects of exigent circumstances may continue for the foreseeable future, that does not mean that those circumstances remain ‘extra ordinary’ or ‘exceptional’ for just as long,” the ruling stated.

The court also remanded the case back to the PRC for more work on its methodology to determine how much lost volume and revenue should be counted and recovered through a surcharge, Kearney said. “In enforcing a ‘count once’ limitation for lost mail, the commission refused to recognize the cost to the Postal Service of lost mail volume beyond the year in which it first appeared,” according to the ruling.

“Today, DMA’s position has finally been vindicated by the court,” said Direct Marketing Association (DMA) Senior Vice President for Government Affairs Peggy Hudson. DMA called on the PRC to “quickly act on the remanded portion of the case, establishing dates for the new normal for each class of mail and setting the specific end date for exigent postage rates,” she said.

The decision is an incentive for the Postal Service to enhance its business stability by “adjusting continually to the information age and not relying on exigent rate increases in perpetuity,” she said.

In December 2013, the PRC granted a request by USPS for an average 4.3 percent postage increase until it collected $3.2 billion to make up for losses suffered in 2008-09 during the Great Recession. The exigent increase went into effect in January 2014 along with an inflation-based increase of 1.7 percent.

In January, the USPS was ordered to give 45 days notice before it rolls back the surcharge and provide bi-weekly estimates in the final three months of the exigent charge. That’s now expected to be reached by early August, Kearney said, which would mean notice coming by mid-June, unless the PRC keeps the surcharge going during deliberations.